Does GOP Really Want to Increase Taxes on the Middle Class?

As the Senate considers an extension of the payroll tax holiday, the big question is: why in the world would Republicans in Congress consider raising middle class taxes by $1,000 to $1,500 per household in the midst of an economic downturn and an election year?

This is a particularly vexing question when you recall the ardor with which the GOP has campaigned against raising the taxes paid by millionaires and billionaires by even one dime.

At the beginning of the week it appeared that virtually every Republican in the Senate was prepared to vote no on a Democratic proposal to extend and broaden the current payroll tax holiday.

Now some are beginning to get cold feet. Senate Republican Leader Mitch McConnell has now reportedly "opened the door" to considering the possibility of a payroll tax cut extension.

But the real question is why Republicans would contemplate voting against extension of the payroll tax holiday in the first place?

Voting no would be like leaping off a political cliff -- taking an iconic vote that would no doubt become emblematic of the fact that they are willing to sacrifice the interests of the 99% to protect the fortunes of the wealthiest people in America. John Paulsen -- the Wall Street hedge fund manager who made $5 billion last year (that's $2,400,000 per hour!) -- might consider this a courageous stand. But the everyday worker -- who will take 48 years to make as much as Paulsen makes in one hour -- might not be so charitable.

Perhaps, you might say, it's because Republicans are taking a strong principled stand against raising the deficit. But that would not be the case, since the Democratic proposal is entirely paid for by a small increase in the taxes of millionaires.

What on earth could drive Senate Republicans to consider taking such a stupid vote? Four possibilities jump to mind.
1). Possible Reason Number 1: They claim the extension of the payroll tax holiday will undermine Social Security and Medicare.

Republican Senator Jon Kyl made this argument on the weekend talk shows. We can dismiss this talk as a complete smoke screen.

First, Senator Kyl and the Republicans have never given a rat's rear about Social Security and Medicare in the first place.

Second, the payroll tax holiday that was passed last year does not remove one dime from the Social Security or Medicare trust funds. In fact, the lost payroll tax is replaced dollar for dollar from the Federal general revenue fund.

The payroll tax holiday itself is simply a means of putting money directly into the pockets of working people that is then replaced with money from the much more progressive overall Federal tax structure.

2). Possible Reason Number 2: Some Republicans really don't believe that taking $1,500 out of the paychecks of everyday consumers will hurt the economy.

There are apparently some Republican lawmakers who have drunk the "Keynesian Economics Doesn't Work" Kool-Aide. They actually believe that the only way to stimulate economic growth is to shovel more and more income into the hands of the top 1% -- the "job creators" -- and watch that money "trickle down" on the rest of us.

The problem is that there is absolutely no evidence that "trickle down" economics works -- or ever worked.

We had an actual experiment with "trickle down" economics during the Bush Administration. The Republicans cut tax rates for the wealthy. The rich got a lot richer, and the median income of everyday families actually dropped. In fact it was the first decade in modern history that the economy did not create one net private sector job.

But -- the Republicans say -- two and a half years ago Congress passed a huge stimulus bill, and we still don't have enough jobs.

Of course, they forget to mention that at the time, the economy was shedding hundreds of thousands of jobs because the financial system had collapsed as a result of the very same policies they are now advocating once again. And there is the inconvenient fact that since the stimulus worked its way through the economy, we have had 20 straight months of private sector job growth -- whereas during the last twelve months of the Bush Administration we lost massive numbers of private sector jobs.

Of course a good deal of that private sector growth has been offset by the Republican refusal to continue the stimulus bill's aid to state and local governments. That resulted in layoffs of teachers, firefighters, police officers -- and other public service workers who they must presume do not hold "real jobs."

The problem with the stimulus bill was not that it didn't work. The problem was that it wasn't big enough. Republicans remind you of a guy who uses a hose to put out half of a house fire, turns off the water and then contends that water doesn't put out fires because the entire fire hasn't been extinguished. The obvious answer is to get more water. Not only do the Republicans want to stop pouring on the water of stimulus -- they want to pour on the gasoline of austerity -- just the opposite of what is needed to put out the bad economic flames.

When an economy is in recession the problem -- by definition -- is too little demand to absorb the goods and services that the economy can produce. The way to solve the problem is to generate more demand to jump-start the economy. This is not just a matter of opinion -- it's a matter of mathematics.

Republicans who run around claiming that economic stimulus -- money in consumer pockets -- isn't what's needed to stimulate economic growth are like people in the middle ages who refused to believe that the earth circles the sun. If the evidence doesn't support their ideological frame, they throw out the evidence -- not the ideological frame. They ignore the facts. It makes no more sense for them to vilify "Keynesians" than it did for an earlier generation to vilify "Copernicans."

There is complete economic consensus that eliminating the payroll tax holiday today will be a disaster for the economy. In fact, economists like Mark Zandi -- who advised John McCain's campaign -- argue that if the payroll tax holiday is not extended, it will shave 1.7% off the gross domestic product and throw the economy into a double dip recession.

3). Possible Reason Number 3: The Republicans oppose extending the payroll tax holiday, because President Obama is for it.

But they have some big problems here. First, many Republicans supported a payroll tax holiday in the past -- and many voted for the original holiday last year. If they form a solid wall of opposition, they will look like hypocrites who changed their position simply to hurt their political opponents.

And, second, the entire issue puts them in political box canyon -- with no escape. If they oppose extension they look like they are obstructing something that is good for the economy -- and very palpable to everyday voters. If they support an extension, they give the President a victory.

4). Possible Reason Number 4: Republicans actually understand that ending the payroll tax holiday will hurt the economy -- and that's exactly what they want to do.

There are clearly some Republicans in Congress who actually believe that ending the payroll tax holiday won't hurt the economy. But there are a lot of Republicans who know exactly what will happen and would be perfectly happy to hurt the economy.

In fact, the Republican leadership has laid a bet that if the economy continues to stagnate they are that much more likely to defeat Democrats next fall. They know that no President in a hundred years has been re-elected when the economy was not materially improving. And they are certainly right that a major issue in next year's election will be who is responsible for the lousy economy.

Their problem is that by supporting an increase in the payroll tax that takes $1,500 out of the pockets of every middle class family, they create an iconic example of why the real problem is the "do-nothing Republican Congress."

Sixty-seven percent of Americans believe that Congress is completely controlled by Republicans. And even though the Senate leadership is Democratic, the Republican willingness to stop action using the filibuster means that they are, in fact, entirely responsible for preventing action to create jobs.

That's good news for Democrats, since in some polls only 9% of Americans have a positive view of Congress and overwhelming numbers believe the country is on the wrong track.

That means that Democrats in Congress can run as outsiders who want to break the log jam in Congress and take action on jobs -- take action to defend the middle class. It means that the President can lay the blame for the lousy economy directly at the doorstep of the Republican Party - and its nominee.

The battle over the extension of the payroll tax holiday plays right into that narrative. It is a huge problem for the Republicans in Congress. Bad enough that the "do-nothing Republican Congress" is doing everything it can to oppose President Obama's agenda to create jobs. Taking $1,500 out of the pockets of everyday Americans gets downright personal.

That's why, when the chips are down, the odds are good that the Republican leadership will fold its hand and support extension of the payroll tax holiday.

Robert Creamer is a long-time political organizer and strategist, and author of the book: Stand Up Straight: How Progressives Can Win, available on Amazon.com. He is a partner in Democracy Partners and a Senior Strategist for Americans United for Change. Follow him on Twitter @rbcreamer.